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Future of Fintech 2019 December

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Capture a 360 ˚ view of global risk across the customer lifecycle www.risk.lexisnexis.com/emea "MarketInvoice has 140 employees in two offices, London and Manchester. Bar- clays has more than ten times our work- force spread all over the UK," he says. "It was imperative that we had direct con- tact with the business relationship man- agers in supporting their SMEs. It wasn't enough to do video calls or email news- letters; we quickly learnt that we had to spend time with each other to ensure the success of the partnership." On the flipside, the advantages have been substantial. Mr Stocker adds: "We have had the opportunity to benefit from the knowledge and footprint of a 325-year- old British banking institution. Our credit risk model is eight years old and well tested, but it can only be enhanced from learning how Barclays has thrived over three centuries." Other big banks have also managed to capitalise on the rapid growth of new service providers, either through simple invest- ments or mutually beneficial partnerships. London-based consumer lending plat- form Lendable secured a £200-million funding line this July from Goldman Sachs Private Capital, and Wells Fargo and J.P. Morgan recently invested in dig- ital bank Greenlight. In fact, according to market intelligence provider CBInsights, large US banks backed a total of 45 equity deals with fintech start- ups in 2018, representing a 180 per cent increase from 2017, and 2019 is on track to be yet another record year. Perhaps the most important reason for large traditional banks to consider partnering fintech collaboration is customer satisfaction. The World Retail Banking Report 2019, published by consulting group Capgemini in conjunction with the European Finan- cial Management and Marketing Associa- tion, found that the top three reasons cus- tomers say they turn to non-traditional players are lower costs, ease of use and faster service. The report also found that fewer than a third of all customers believe their current bank offers a variety of useful financial apps or timely and relevant prod- uct recommendations. And while it's evident that traditional banks are generally able to deliver a posi- tive experience for customers in channels that are considered "mature", such as the From disruption to collaboration The dynamic between fintechs and traditional financial institutions is shifting from disruptive competition to innovative collaboration, but what are the benefits of these partnerships for clients and customers? hen Metro Bank became the first UK financial institution in over a century to be granted a banking licence, it paved the way for a slew of oth- ers and introduced the term "challenger bank" to the vernacular. But almost a dec- ade on, the neologism might be turning into a misnomer. As the new generation of financial ser- vice providers swells and comes of age, traditional banks are increasingly realis- ing fintech collaboration is the best way to thrive and that challenging the nifty new- comers might actually be fruitless. A recent survey conducted by news- wire Finextra and the European Banking Authority showed that 81 per cent of bank- ing executives consider working with part- ners, such as emerging fintech companies, to be the best way of tackling digital trans- formation, not least because clients are increasingly demanding it. "Regardless of how fast incumbent banks can run internally, the real opportunities to deliver game-changing innovation will open up by collaborating with third par- ties, such as fintech startups," says Danny Healy, an executive at software company MuleSoft, which is owned by tech giant Salesforce and helps organisations, includ- ing HSBC, Mastercard and Atom Bank, cre- ate strategies for application programming interfaces, or APIs. "The key advantage of emerging fin- techs lies in their ability to build and move fast, while offering unbeatable ease and convenience," he explains. "Rather than trying to counter these challengers, incumbent banks should learn from them and adopt the same 'build fast, fail fast' mentality, while opening themselves up to collaboration." Underscoring this sentiment, Barclays in August 2018 announced it was partner- ing with MarketInvoice, a business finance lender founded in 2011, giving the high street bank's small and medium-sized enterprise (SME) clients access to MarketIn- voice's lending facilities. Barclays' corporate bank had already been offering invoice financing to large businesses, but the new deal extended the proposition to SME clients. SMEs account for three fifths of the employment and around half of turnover in the UK pri- vate sector, according to the Federation of Small Businesses, equating to a lucrative client base. Anil Stocker, founder and chief executive of MarketInvoice, says he and his team have encountered both challenges and opportu- nities since announcing the tie-up. branch and website, the report showed they must do a much better job at delivering a smooth customer experience when it comes to increasingly popular digital channels like mobile, chatbots and voice assistants. In the survey, almost 72 per cent of Gen- eration Y customers, born between 1980 and 1994, say they consider mobile apps to be an important banking channel, but fewer than a third report a positive experience in this channel. "In an era of rising consumer expecta- tions, banks are challenged to offer their customers a consistent engaging experi- ence across all channels of branch, web and mobile," according to Anirban Bose, chief executive of Capgemini's financial services strategic business unit. "Banks that iden- tify their top capabilities and then seek partnerships with fintechs and other busi- ness sectors to enhance their offerings in other areas will be the most successful." To be sure, there are risks to partnering, the most obvious of which might be cul- tural clashes. Incumbents are often large and complex in structure, with consent from many stakeholders required before an acquisition or investment can be signed off and executed. Some startups will also be hesitant to yield even a small amount of autonomy to a large corporation, fearful that a big busi- ness might wrest control from the leader- ship or founders and compromise culture. MarketInvoice's Mr Stocker says the best way of ensuring success is to ensure senior management on both sides of any given deal are "aligned on processes and outcomes". "This is imperative, especially when it comes to getting the message out across the organisations, importantly to the grass- roots," he says. Mr Healey at MuleSoft agrees. He con- cludes: "A culture of collaboration will pave the way for traditional banks and fintechs to enter into a mutually beneficial, symbiotic relationship and deliver truly game-chang- ing innovation." Although this publication is funded through advertising and sponsorship, all editorial is without bias and sponsored features are clearly labelled. For an upcoming schedule, partnership inquiries or feedback, please call +44 (0)20 8616 7400 or e-mail info@raconteur.net. Raconteur is a leading publisher of special-interest content and research. Its pub- lications and articles cover a wide range of topics, including business, finance, sustainability, healthcare, lifestyle and technology. Raconteur special reports are published exclu- sively in The Times and The Sunday Times as well as online at raconteur.net. The information contained in this publication has been obtained from sources the Proprietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be reproduced with- out the prior consent of the Publisher. © Raconteur Media /future-fintech-2019-dec @raconteur /raconteur.net @raconteur_london FUTURE OF FINTECH R O U N D T A B L E E N T R E P R E N E U R S C R Y P T O C U R R E N C Y Six fintech leaders debate the sector's diversity problem and the measures needed to fix it Why so many fintech founders still originate from the traditional end of finance Venezuelans turn to cryptos as the nations struggles with hyperinflation and a worthless currency 04 08 12 raconteur.net Josie Cox W Finextra 2019 Capgemini/Efma 2019 MOS T EFFEC TIVE WAYS FOR BANKS TO DIGITALLY TR ANSFORM Survey of banking executives TOP THREE RE ASONS CUS TOMERS T URN TO NON-TR ADITIONAL PL AYERS A culture of collaboration will pave the way for traditional banks and fintechs to deliver truly game-changing innovation I N D E P E N D E N T P U B L I C A T I O N B Y 1 5 / 1 2 / 2 0 1 9 # 0 6 3 9 R A C O N T E U R . N E T R E L A T I O N S H I P S Publishing managers Reuben Howard Alexion Lai Design Joanna Bird Sara Gelfgren Kellie Jerrard Harry Lewis-Irlam Celina Lucey Colm McDermott Samuele Motta Jack Woolrich Head of production Justyna O'Connell Head of design Tim Whitlock Managing editor Benjamin Chiou Associate editor Peter Archer Deputy editor Francesca Cassidy Digital content executive Taryn Brickner Design Joanna Bird Sara Gelfgren Kellie Jerrard Harry Lewis-Irlam Celina Lucey Colm McDermott Samuele Motta Jack Woolrich Head of production Justyna O'Connell Head of design Tim Whitlock Managing editor Benjamin Chiou Associate editor Peter Archer Deputy editor Francesca Cassidy Digital content executive Taryn Brickner 81% 70% Collaborate with partners to build/change existing systems Lower costs 8% Build a new operating layer on their own 6% Outsource processes, including core systems 5% Create a new bank ("neo bank") on the side 68% 54% Ease of use A faster service Felipe Araujo Photojournalist covering social and political issues, he contributes to titles such as The Guardian, The Establishment, BuzzFeed, Medium and The Nation. Simon Brooke Award-winning journalist, he writes for a number of international publications and specialises in business, finance, marketing and lifestyle trends. Josie Cox Business reporter, commentator and broadcaster, she worked at Reuters and The Wall Street Journal, and was business editor of The Independent. Marianne Curphey Award-winning financial writer, blogger and columnist, she has held positions at The Guardian and The Times, and writes for a wide variety of publications. Nick Easen Award-winning journalist and broadcaster, he writes on science, tech, economics and business, producing content for BBC World News, CNN and Time magazine. Christine Horton Long-term contributor to specialist IT titles, including Channel Pro and Microscope, she covers tech's impact on business. Distributed in Published in association with Contributors 16-18 JUNE 2020 Rachael Revesz Journalist and commissioning editor, specialising in finance and women's rights. Jenny Turnton Financial journalist at Rhotic Media, she contributes to Open Banking Expo magazine and has written for the Financial Times, Global Capital and others.

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